US jobs data fuels hawkish Fed shift, pressures new chair

Key facts

• Strong US jobs data was released on Friday.
• Treasury yields surged following the jobs report.
• The Nasdaq index fell 2%.
• The Fed enters a blackout period before its upcoming FOMC meeting.
• White House officials argued the jobs data does not foreshadow higher inflation.

The stronger-than-expected U.S. jobs report released on Friday has created a policy tug-of-war between the White House, the market, and the Federal Reserve. President Trump argued the 'great Jobs Report' should be bullish for stocks, not bearish, emphasizing that economic growth does not automatically translate into inflation. White House NEC Director Kevin Hassett echoed this sentiment, stating the jobs data is not foreshadowing higher inflation and that oil market disruptions are unlikely to materially impact core inflation. Hassett also argued that strong supply-side growth can help prevent runaway price pressures and suggested the Fed has room to be patient, even going so far as to say policymakers have been behind the curve and have had ample room to cut rates.

The market, however, viewed the data differently. Treasury yields surged following the report, with traders focusing on the risk that a resilient labor market and sticky inflation could keep rates elevated for longer. The two-year yield rose 10 basis points to 4.151%, and the 10-year yield rose six basis points to 4.537%. That repricing weighed on equities, with the brunt of the impact being felt by the NASDAQ index, which is down 2% currently at 26294.95. Its price is now running away from its 100-hour moving average at 26569. The S&P is testing its 100-hour MA at 7502.51.

Newly appointed Fed Chair Kevin Warsh faces an early test, with White House officials arguing for easing policy and bond traders pushing yields higher due to inflation concerns. The Fed enters its blackout period today ahead of the FOMC meeting, leaving markets to interpret data independently. Investors have heard little from Warsh, creating uncertainty about how he will balance growth, inflation, yields, and political pressure.